German Trade Unions

Germany has been a country with a relatively peaceful relationship between trade unions and businesses since after WW2. After the war, the parliament introduced the so-called “Tarifautonomie” (free collective bargaining). The important word here is “collective”, not “free” (free means that the government cannot interfere). Since the introduction of this law, wage bargaining in Germany has been dominated by three or four large industrial trade unions. They set the pace and everybody else had to follow.

Union membership often is a neccessary condition for entering a job at a larger industrial company, even though this is not really legal. Even larg parts of the service sector economy are unionized. “Ver.di” is a de facto monopoly union responsible for service sector and public office jobs. And it gets worse: There is a law saying that every business with at least five (5!) employees has to allow its employees to form a union and elect a so-called “Betriebsrat” (works council). The works council then leads the business together with the owners of the business.

This may sound like communism, but it helped create the relatively peaceful relationship between workers and business leaders. And I can tell you why: This system is susceptible to corruption. The leader of the works council gets bribed by the business owners, so that he keeps workers under control and moderates their wage demands. The result is that there are almost no strikes, and, the larger the company and the union, the more opportunities for promotion workers get inside unions. A perfect example for this system was/is car manufacturer Volkswagen (just google “Volkswagen scandal”, and you will see what I mean). German governments have supported the system of “Tarifautonomie” continuously. The close friendship between Chancellor Gerhard Schröder (1998-2005) and Volkswagen boss Ferdinand Piech is a legendary example.

In fact, the “Tarifautonomie” in its form of the late 20th century in Germany is not unlike a corporatist/fascist system, in which the government tries to pacify union-business relations by putting unions under control of companies. The fascist state does it by openly prohibiting labor unions. In modern Germany it is done by corrupting unions and by putting as large a distance as possible between union leaders and workers.

It is clear that this system also made German businesses slow to react to a changing economic environment. When job cuts become the rule, the relationship between business and union turns sour. The economic environment has been changing since the 1970s. There are more smaller unions now. Some businesses have experienced the emergence of lots of “splinter unions”. All this has happened because of the change from an industrial economy to one based on services.

Smaller unions have blocked bargaining processes in the airline business and in public hospitals, with the effect of massive disturbances for the customers of those businesses. Now, politicians AND business people are getting angry about this trend and start to talk about a possible prohibition on strikes by small unions that do not represent the whole work force of a certain industry or services sector. This is basically a call for total cartelization of unions. I know why German business leaders do not like small unions. It would destroy their cosy and corrupt relationship with large unions. Workers’ actions would become more uncontrollable.

I have never understood why cartelization of labor should be a good thing. The free allocation of labor is hindered by large unions. The cartelization of workers’ unions and business associations is a breeding ground for corruption and powerful political lobby groups. It is also unfair against small business owners, who HAVE to side with their larger and more powerful competitors in the business association during negotiations with unions. In my opinion, a union should be legally limited to a single company. What we need today is a “trust buster” like Theodore Roosevelt and a resurgence of some parts of late 19th century, early 20th century legal thought, when every cartel was deemed illegal, no matter what it did and who it represented.